In the fiercely competitive space launch industry, United Launch Alliance and SpaceX have established themselves as the reigning providers of U.S. national security launch services, leaving little room for potential rivals to challenge their dominance.
However, with the Space Force’s latest strategy to procure future launch services, new doors of opportunity may finally open for up-and-coming contenders.
“Our strategy shows a lot of confidence in the commercial sector,” said Maj. Gen. Stephen Purdy, program executive officer for assured access to space at the U.S. Space Force’s Space Systems Command.
In a bid to expand the military’s capabilities for putting payloads in space, Purdy’s office in February rolled out a draft solicitation for the National Security Space Launch (NSSL) Phase 3, a multibillion-dollar procurement of launch services projected for 2025 through 2029.
The goal is to procure reliable launch services for traditional military and intelligence heavy-lift missions while seeking smaller, medium-size rockets to deploy the Pentagon’s new proliferated constellation in low Earth orbit.
The forthcoming Phase 3 procurement also addresses criticism that surfaced four years ago when the Air Force formulated the NSSL Phase 2 plan. Lawmakers and industry players at the time expressed reservations about the strategy, alleging that it stifled fair competition.
LAUNCH CONTRACTS IN TWO SEPARATE LANES
While NSSL Phase 2 was a single competition limited to launch providers that could fly the full range of missions, the Space Force will seek bids under two separate contract types in Phase 3.
NSSL Phase 3 Lane 1 will solicit bids for the more “risk tolerant” missions to low Earth orbit.
NSSL Phase 3 Lane 2 is modeled after the Phase 2 procurement that ULA and SpaceX won in 2020. The Space Force will award five-year contracts to two launch providers capable of flying a full range of missions to the most demanding orbits. These two providers will share 40 missions, with the top scorer winning 24 and the other 16 — a 60/40 split.
In Lane 1, as many as 30 missions will be competitively awarded between 2025 and 2029. There’s an option to extend the contract period until 2034 to accommodate new vehicles that may need more time to complete development.
The Lane 1 procurement is geared to attract companies like Rocket Lab, ABL Space, Firefly, Relativity Space and other small launch specialists working to bring larger rockets to market.
“They’re going after those medium-class launches. And they’re getting venture capital to do it,” Purdy told SpaceNews.
Lane 1 will be structured as indefinite delivery/indefinite quantity (IDIQ) contracts awarded to multiple vendors, essentially pre-qualifying them to bid for firm orders down the road.
The Space Force will issue annual calls for new entrants to “on ramp” into Lane 1 by submitting their plans for technical review.
A rocket doesn’t need to have flown to be eligible for Lane 1. Contenders still 12 to 36 months from their first launch can qualify for a Lane 1 IDIQ contract by acing the Space Force’s review. However, Lane 1 companies will need to fly at least one mission to orbit before the Space Force will award them a firm order for a launch.
The Space Force anticipates that at least some of the companies it lets into the IDIQ pool won’t have met the one-launch requirement for winning firm orders for Lane 1 missions as they arise. If no new entrants qualify for Lane 1 missions puts out for bids, Purdy said Space Force would turn to its Lane 2 providers to fly those missions. “We structured Lane 1 so if for some reason none of them show up, the winners of Lane 2 can go clean up on Lane 1,” Purdy said.
BILLIONS AT STAKE FOR LAUNCH PROVIDERS
The Pentagon’s 2024 budget request includes $2.1 billion for 10 NSSL missions, with 30 more missions worth $8.4 billion forecast for 2025 to 2028.
In a separate funding line, the Pentagon is budgeting $529 million in 2024 to launch five batches of satellites to low Earth orbit for the Space Development Agency (SDA), with an additional 11 missions worth $1.4 billion planned from 2025 to 2028.
SDA, an agency that is part of the Space Force, is building the Pentagon’s largest-ever constellations of missile-tracking and data transport satellites.
SDA’s launches — currently assigned to ULA and SpaceX under the NSSL Phase 2 contract — are likely to be competed in Lane 1, said Col. Doug Pentecost, Space Force deputy program executive officer for assured access to space.
PLAYING FIELD TAKING SHAPE
Of the expected new entrants in Phase 3, Rocket Lab has been the most outspoken about its NSSL ambitions.
A dominant player in the small launch industry, Rocket Lab is developing a reusable medium rocket, Neutron, designed to carry payloads of up to 13,000 kilograms to low Earth orbit.
Rocket Lab CEO Peter Beck said this payload capacity puts Neutron in “the sweet spot” for Phase 3 Lane 1 missions and enables it to compete in the commercial and government markets with SpaceX’s Falcon 9.
Another rocket company, Relativity Space, plans to be a contender in Lane 1 with its future 3D-printed Terran R vehicle, designed to lift 23,500 kilograms to low Earth orbit.
“Relativity looks forward to competing for NSSL Phase 3 awards,” the company’s co-founder and CEO Tim Ellis said in a statement to SpaceNews.
“We’re confident that Terran R is uniquely positioned to fill the gap between existing launch systems at an appreciable cost savings,” he added.
Relativity on March 22 attempted the first launch of its small Terran 1 vehicle from Cape Canaveral, Florida. The rocket got off the ground and demonstrated the integrity of 3D-printed space hardware but failed to reach orbit.
Ellis said the launch “proved Relativity’s 3D-printed rocket technologies that will enable our next vehicle, Terran R.”
Relativity had planned a first launch of Terran R in 2024 but the company on April 12 announced the vehicle is being redesigned and is now targeting 2026 for the vehicle’s first launch.
ABL Space and Firefly, small launcher operators mentioned by Space Force officials as potential Lane 1 competitors, did not respond to questions from SpaceNews on whether they plan to compete in NSSL Phase 3.
CONCERNS ABOUT FAIR COMPETITION
Following the release of the Phase 3 draft solicitation, some companies have expressed concerns that allowing Lane 2 providers to bid for Lane 1 missions puts the new entrants at a competitive disadvantage.
Fledgling companies in Lane 1 would be up against ULA and SpaceX, who naturally benefit by being incumbents and, if selected in Lane 2, would get additional government funding unavailable to Lane 1 competitors.
In fixed-price bids for Lane 1 missions, for example, a new entrant will have to absorb the costs of “mission assurance,” which are engineering and design reviews the government requires to assess the risk that a mission flown by that vehicle could fail.
The winners of Lane 2 also submit fixed-price bids, but their costs are partially covered by the government. Lane 2 companies are eligible for “launch service support” funding, a subsidy to cover rocket development or infrastructure expenses unique to NSSL. Lane 2 winners also qualify for annual incentive fees of up to $20 million.
Relativity CEO Ellis suggested the two-lane structure as currently laid out would make it hard for emerging launch companies to challenge incumbents.
“The Space Force has taken a promising step in the right direction by opening up Lane 1 to new entrants,” he said in the statement.
“In order to maximize the government’s access to the best performing and most cost-effective vehicles,” Ellis said, “both new entrants and incumbent providers should be able to bid for all missions they are capable of performing.”
“A truly open competition,” he said, “would allow new providers to introduce new technology faster, and ensure downward pressure on national security launch costs.”
QUESTIONS ABOUT ‘MISSION ASSURANCE’
Col. Chad Melone, senior materiel leader for mission solutions at the Space Systems Command, said the government would assess the risk profile of each competitor based on a “tiered mission assurance” scale.
That means that the higher the value of the payloads, the higher the mission assurance level the government expects the launch company to meet.
The concept of tiered mission assurance and how it will be implemented is still unclear to many in the industry, said Richard French, senior director of business development and strategy at Rocket Lab.
“Where the mission assurance knob is going to be set to be able to offer a fixed price, commercial service in Lane 1 is an open question,” French said March 15 at the Satellite 2023 conference in Washington.
He said Rocket Lab provided feedback to the government following the release of the Phase 3 draft RFP.
“And the biggest question is what is the market going to look like for Lane 1?” he said. “And I think this is a big debate within the department.”
“Of course, we’d love to see the Space Development Agency manifest be allocated to Lane 1 and to have the right kind of payloads to create those opportunities,” French said.
Todd Harrison, managing director of Metrea Strategic Insights, characterized the Phase 3 two-lane approach as good in theory, although the devil will be in the details.
If Lane 1 does not create real competition that gives new entrants a fair chance, the Space Force risks continuing its dependence on just two providers, Harrison said.
The Air Force, in the previous NSSL Phase 2 procurement, considered bids from ULA, SpaceX, Blue Origin and Northrop Grumman.
After losing Phase 2, Northrop Grumman terminated its Omega rocket program. Blue Origin is still pressing forward with its New Glenn heavy-lift rocket, although it lost the government funding it was getting during the Phase 2 competition.
Leading up to the selection of Phase 2 providers, Blue Origin and its backers in Congress unsuccessfully lobbied the Air Force to select three suppliers. In 2019, Blue Origin filed a legal protest arguing that the NSSL selection criteria stacked the cards in favor of established companies. The Government Accountability Office rejected that claim.
The RAND Corp., a government-funded think tank, in a 2020 study, made the case that the Air Force should support three NSSL launch providers to shore up the U.S. industrial base.
WHAT ABOUT BLUE ORIGIN?
Blue Origin’s long-delayed heavy rocket New Glenn, at least on paper, “looks like a great vehicle that could challenge ULA’s Vulcan and SpaceX’s Falcon rockets,” said Marco Caceres, director of space studies at the Teal Group, a market research firm.
With a reusable first stage powered by seven Blue Origin-made BE-4 engines, “it would be one of the more powerful rockets,” he said.
So far, the company has been mum about its plans for Phase 3 or when New Glenn will fly. “It’s anyone’s guess,” Caceres said. “They’re years behind schedule.”
Ariane Cornell, Blue Origin’s vice president of commercial orbital, astronaut and international sales, said at the Satellite 2023 conference that New Glenn is “making fantastic progress, and we’re going to fly when we’re ready.”
With regard to NSSL, Cornell said, “We don’t comment on what we’re bidding for.”
Pentecost, the Space Force deputy program executive officer, said Feb. 24 that the government continues to work with Blue Origin on a plan to certify New Glenn for NSSL after it completes three commercial flights.
The Space Force in November announced a Cooperative Research and Development Agreement (CRADA) with Blue Origin that does not provide government funding but supports “certification activities.”
From October 2018 through December 2020, the Air Force paid $255 million for New Glenn development costs in exchange for access to the vehicle’s engineering data. The original six-year agreement worth $500 million was terminated after Blue Origin was eliminated from NSSL Phase 2.
An unexpected wild card in Phase 3 is Boeing, which hinted it would offer the enormously expensive Space Launch System rocket for NSSL missions. The SLS launched NASA’s Artemis 1 mission in late 2022 on an uncrewed test flight around the moon and is anticipated to fly Artemis 2 in late 2024 with astronauts on board.
Boeing said in a statement the SLS’s deep space capability “can be an asset for the NSSL Phase 3 contract.”
The cost of SLS, estimated at about $2 billion per mission, makes it unlikely it would ever be considered for NSSL, said Caceres.
“In no universe does that make any sense,” he said. “That rocket is old technology.”
He noted that the Air Force and ULA decided to part ways with the Delta 4 Heavy rocket because of its price tag, which ranges from about $350 million to $400 million per mission. “If you wanted a giant rocket, you could just stick with Delta 4.”
WHEN WILL VULCAN BE READY?
A looming concern for the Space Force is that the vehicle selected to fly 60% of NSSL Phase 2 missions — ULA’s Vulcan Centaur — is years behind schedule and has yet to perform its first launch.
He said that separate qualification testing of the Blue Origin BE-4 engines that power Vulcan’s first stage are “perhaps a little bit more than halfway” complete. “That is likely to be the pacing item.”
Vulcan must complete two orbital flights before it’s certified for national security launches. ULA already shifted the first NSSL Phase 2 mission assigned to Vulcan to its legacy vehicle, the Atlas 5.
The Space Force expects Vulcan to fly its first NSSL Phase 3 mission before year’s end, Pentecost said.
After the May “Cert-1” launch, the plan was to fly a Sierra Space Dream Chaser cargo spacecraft to the International Space Station as the “Cert-2” launch.
ULA confirmed on March 24 that Dream Chaser may not be ready until late 2023, so it’s prepared to use a mass simulator as an alternative. The company said it is on track to launch Vulcan’s first NSSL mission in the fourth quarter of 2023.
The Pentagon invested nearly $1 billion in the development of Vulcan and is counting on it to end its reliance on the Russian-made RD-180 rocket engine that powers ULA’s Atlas 5.
Congress in 2016 directed the Pentagon to stop using launch vehicles powered by Russian engines and only allowed DoD to award contracts for Atlas 5 launches through 2022.
The Space Force could be in a serious bind if Vulcan is further delayed, said Caceres. “The only options in the near term are Atlas 5, but that’s on its way out, and SpaceX, which has a full manifest of customers.”
A SHORTAGE OF CAPACITY
Concerning Phase 3, Bruno said the Space Force could face a supply crunch as launch providers are bracing for a surge of commercial business between 2024 and 2027.
That’s the period when Amazon will be launching its Project Kuiper internet constellation.
In the largest single purchase of commercial launch services, Amazon signed deals for 83 launches from Arianespace, Blue Origin and ULA last year. Amazon plans to start launching satellites in the first half of 2024.
“There is now, for the first time in 30 years, a global shortage of launch capacity,” said Bruno. That is partly due to Amazon’s contracts but also the withdrawal of Russian vehicles from the commercial launch market after the invasion of Ukraine.
ULA’s Vulcan will launch 38 missions for Amazon, putting the company in a situation where it’s never been before, juggling the needs of a large commercial customer and those of the NSSL program.
“The government has become a minority purchaser of launch,” Bruno said. A potential consequence of that, he said, is that “they’re going to have trouble getting on the manifests and having the flexibility they are accustomed to.”
Caceres said ULA’s main challenge in Phase 3 will be SpaceX. He noted that SpaceX was not happy that it only won 40% of Phase 2 missions and is likely to compete aggressively so it gets 60% in Phase 3, he added. “Hopefully, ULA can make Vulcan partially reusable and bring down the price to be more competitive with the Falcon vehicles.”
NEED TO ATTRACT MORE VENDORS
The industry landscape going into Phase 3, with ULA and SpaceX firmly in command of NSSL, is not exactly good news for the Space Force, which could benefit from having a third heavy launch provider, Caceres said.
Another competitor would help bring down costs, he said. That proved to be the case when ULA had to start competing against SpaceX.
ULA, a joint venture formed in 2006 when the Pentagon ordered Boeing and Lockheed Martin to merge their launch business, enjoyed nearly a decade as the sole provider of national security launches. It wasn’t until 2014 when Elon Musk sued the Air Force over a proposed sole-source ULA block buy that SpaceX was allowed to compete for missions under what was then called the Evolved Expendable Launch Vehicle Phase 1A program. The Air Force later changed the name EELV to NSSL.
ULA back then was far more expensive than SpaceX. However, in NSSL Phase 2 SpaceX prices have gone up and are closer to ULA’s prices.
Under EELV Phase 1A, for example, the Air Force in 2019 awarded three missions to ULA for an average of $147.2 million per launch and three missions to SpaceX for an average of $99 million per launch.
Under NSSL Phase 2, the Space Systems Command has ordered nine missions from ULA for $1.1 billion — or $122 million per launch on average —and six from SpaceX for $774 million, or $129 million per launch on average.
“The more competition there is, the better for us,” the chief of space operations of the U.S. Space Force Gen. B. Chance Saltzman told reporters March 7.
Since the days when the Air Force only had one provider, the “progress across the industry base has been really impressive,” he said. “I will say that going into NSSL Phase 3, I’m excited because there are so many more people vying for launches in support of the Space Force, in support of national security.”
“Do I think there’s enough competition?” Saltzman asked. “I always want more, and that’s why we’re trying to set up this Phase 3 to be as fair and as open as possible so we can attract as many vendors as we can.”
This article originally appeared in the April 2023 issue of SpaceNews magazine.